Here are the main points of an important answer to that question by
economist and former Wall Street honcho, Michael Hudson:

The six-nation Shanghai Cooperation Organization (SCO) is
comprised of Russia, China, Kazakhstan,
Tajikistan, Kyrghyzstan and Uzbekistan, with observer status for Iran, India,
Pakistan and Mongolia.It was joined recently by Brazil, for trade discussions among the BRIC
nations (Brazil, Russia, India
and China),
all of which seek a multi-polar world.

If it's not a move to make US hegemony obsolete, then what's
the purpose of this new organization? US
diplomats may well wonder.After all, this is exactly what a multi-polar
world means:no hegemony by any one country.Another clue as to what's about to happen:in 2005 the SCO asked Washington
to set a timeline to withdraw from its military bases in Central
Asia.

It seems that the US has inadvertently driven Russia, China
and their neighbors to find common ground by developing an alternative to the
dollar as a dominant or reserve currency, and hence an end to the US ability to
run balance-of-payments deficits ad infinitum.

Mr. Medvedev called for China,
Russia and India to "build an increasingly
multi-polar world order." What this
means in plain English is:We have reached our limit in subsidizing the United States' military encirclement of Eurasia
while also allowing the US to
appropriate our exports, companies, stocks and real estate -- in exchange for
paper money of questionable long-term worth!

"The artificially maintained unipolar system," Mr.
Medvedev says, is based on "one big center of consumption, financed by a
growing deficit, and thus growing debts, one formerly strong reserve currency,
and one dominant system of assessing assets and risks."At the root of the global financial crisis,
he concluded, is simply that the United States manufactures too
little and spends too much.Especially
upsetting to Russia is U.S. military spending, such as the stepped-up US military aid to Georgia,
the NATO missile shield in Eastern Europe and, to all the other BRIC and SCO
members as well, the huge US
military and commercial buildup in the oil-rich Middle East and Central Asia.

The main worry of all these countries is America's
ability to print unlimited amounts of dollars.Overspending by US consumers on imports (way in excess of US exports),
US buy-outs of foreign companies and real estate, and the many billions of dollars
that the Pentagon spends abroad . . all end up in foreign central banks.These central banks then face a hard choice:either recycle these dollars back to the United States
by purchasing US Treasury bills, or to let the "free market" force up their
currency relative to the dollar thereby pricing their exports out of world
markets and hence creating domestic unemployment and business insolvency.

So, when China
and other countries recycle their dollar inflows by buying US Treasury bills to
"invest" in the United
States, this buildup is not really
voluntary.It does not reflect faith in
the U.S.
economy enriching foreign central banks for their savings, or any calculated
investment preference, but simply a lack of alternatives."Free markets," US-style, has maneuvered many
countries into a system that forces them to accept dollars without limit.But now they want out.

Central banks now hold $4 trillion of U.S. bonds in their international reserves and
these huge loans to the U.S.
have financed most of the US Government's domestic budget deficits for over
three decades! Consider that about half
of US Government discretionary spending is for military operations including the
operation of more than 750 foreign military bases as well as increasingly
expensive operations in the oil-producing and oil-transporting countries.

The international financial system is organized in a way
that finances the Pentagon, along with US buyouts of foreign assets expected to
yield much more than the Treasury bonds that foreign central banks hold. Therefore, the main political issue
confronting the world's central banks is this:How to avoid adding yet
more dollars to their reserves and thereby financing ever more US deficit
spending including military spending on their borders.

For starters, the six SCO countries, plus the BRIC countries,
intend to trade in their own currencies so as to get the benefit of mutual
credit that the United
States until now has monopolized for
itself.Toward this end, China has struck bilateral deals with Argentina and Brazil
to denominate their trade in renminbi rather than the dollar, sterling or
euros, and two weeks ago China
reached an agreement with Malaysia
to denominate trade between the two countries in renminbi.

China, Russia and other countries would no doubt like
to get the same kind of free ride that America has been getting.As matters stand, they see the United States
as a lawless nation, financially as well as militarily.How else to characterize a nation that holds
out one set of laws for others on war, debt repayment and treatment of
prisoners but ignores those very laws in regard to itself? The United States is now the world's
largest debtor, yet has avoided the pain of the "structural adjustments" that it
so rigorously imposes on other debtor economies.In view of the austerity programs that Washington forces on other countries via the IMF and
other Washington vehicles, US
interest-rate and tax reductions (in the face of exploding trade and budget
deficits) are seen as the height of hypocrisy.

The United
States tells debtor economies to sell off
their public utilities and natural resources, raise their interest rates and
increase taxes while gutting their social safety nets so as to squeeze out
money to pay creditors.And at home,
Congress blocked China's
CNOOK from buying Unocal on grounds of national security, much as it blocked Dubai from buying US ports
and other sovereign wealth funds from buying into key infrastructure.Foreigners are invited to emulate the
Japanese purchase of white elephant trophies such as RockefellerCenter,
on which investors quickly lost a billion dollars and ended up walking away.

Foreigners see the IMF, World Bank and World Trade
Organization as Washington
surrogates in a financial system backed by American military bases and aircraft
carriers encircling the globe.But this
military domination is a vestige of an American empire no longer able to rule
by economic strength.On the economic
front there is no foreseeable way in which the United States can work off the
$4 trillion it owes foreign governments, their central banks and the sovereign
wealth funds set up to dispose of the global dollar glut.America has become a deadbeat and
indeed, a militarily aggressive one as it unrealistically seeks to hold onto
the great power it once earned by economic means.

At present it is foreign
savings, not the savings of Americans, that are financing the US budget
deficit, by buying most Treasury bonds.The effect is taxation without representation for "foreign voters" no
representation with regard to how the US government uses their forced
savings.Meanwhile the US national debt continues into the
stratosphere.Example:Fannie Mae and Freddie Mac were recently
taken over by the US,
thereby formally adding their $5.2 trillion
in obligations onto our national debt.

So where is all this money coming
from that the Fed is spending and therefore adding onto the already frightening
national debt?

Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've (more...)